The major U.S. stock indices held their ground last week and even finished the week with gains. The Nasdaq 100 and Nasdaq Composite led the way for the week with gains of 0.84% and 1.10% followed by the S&P 500 with a gain of 0.28%. The U.S. stock indices still look vulnerable over the near term with a decline likely to occur soon. The tech oriented Nasdaq indices look the most likely to lead the decline despite their relative strength this week. That is understandable since the S&P 500 has less exposure to the tech sectors and more exposure to the energy and commodity sectors which led the way in the recent rally. These latter sectors are holding on to their gains very well even though the Nasdaq-related sectors out-performed them last week. After this expected short swing down, the U.S. stock market looks ready to continue up with many stocks holding onto their recent gains or setting up for future gains. I would still expect the Nasdaq 100 stocks to lag with the energy and commodity sectors continuing to lead.
Banks got a big boost mid-week when the Fed announced that a possible interest rate hike is still on the table for its June meeting. The Fed thinks the economy is firming up somewhat but they must be looking only at government provided statistics to believe that. The U.S. economy is in terminal decline as far as this regime is concerned. The U.S. dollar is in danger of losing its world reserve currency status and when that happens the last remnants of the false facade of normalcy is torn away.
There is nothing of real value that remains behind the once mighty U.S. dollar. Warmongering and empire building cannot replace a once vibrant but now hollowed out economy as the primary occupation of a country and render sustainable good outcomes for its people. The country is now constructed to serve the interests of government and its crony oligarchs with the people to be treated as livestock to be managed and butchered as necessary. The people have been indoctrinated and propagandized to think their way of life is the new normal in the modern age with endless streams of paper money provided by the government to perpetually sustain life. America has been living on borrowed time for a long time and the end is much closer than the public thinks.
The American people are told they are exceptional and because of that they should bully and push their way through the world and forcefully tell everybody else what to do and how to do it. What is so frickin exceptional about having almost 50 million people on food stamps, close to 100 million able adults not even in the labor force, and military forces causing hate and discontent everywhere they intervene with no positive results to show. Our population is the most heavily incarcerated population in the world, largely due to the excessive number and inanity of the laws. Our economy cannot even provide enough decent paying jobs to prevent a very large percentage of working Americans from having to work two or more jobs to make ends meet. As long as the government and its oligarchs can keep the financial markets artificially elevated then everybody can continue to deny reality and keep the empowered and monied ruling elite at the top of the pyramid for a while longer.
To be clear, I am not against making money, I just think we should all have a shot at the brass ring if we so choose and in any way we deem to do it as long as you do not transgress against another or their property. This fascist system is rigged to benefit the relative few at the expense of the many primarily through central banks, fractional reserve banking, and almost unlimited amounts of fiat money. But there are limits even to their paper money printing as there are serious repercussions to continually running up huge levels of debt that will never be repaid with money of similar value.
Mother nature does not like to be ignored for as long as these criminal gangs called governments have done with their artificial money and their artificially constructed house of cards. Nature will eventually cleanse the system in which the people do not have the courage, integrity, or intelligence to do so. Ignorance is no excuse, especially at this late date. The evidence is becoming too overwhelming that these governments and their system at the very least do not represent the people’s interest. At most they are diabolical devils in sheep’s clothing out to largely destroy and take advantage of those that are not in their elite club. Some lucky and energetic few find cracks in the system and have prospered, which is great, but that is not the reality shared by most due to this fascist system. This system targets, conditions, and oppresses the majority of its citizens, at varying levels, to fail to a large degree.
People think government largess is a good thing but the government is providing its citizens with much more than they admit to and the majority of it is evil. It also comes with a huge price tag that the government and their cronies do not tell you about – the control of your life to a much larger degree than you realize. So there is food and beer in the fridge and there is a big game or concert this weekend, all is good right. Those who continue to think this way are up for a very rude awakening in the near future. This system is going down and there is no fixing it at this point. Experience is a hard teacher and there will be hard lessons for all of us to learn soon.
As far as interest rates, this economy cannot stand a rise in rates. The December rise of only a quarter of a point temporarily tanked the stock market until the dollar started falling which triggered a rally in commodities. A rise in rates would hit the auto and house sales hard. Consumer, corporate, and government debt are all extremely high which are primary reasons that interest rates have been kept artificially low by the Fed. This makes me think that there is something going on behind the curtain that the Fed is not telling the public that may raise interest rates in the future.
There have been many reports from Zerohedge in the last year of China and Russia selling large amounts of Treasuries. There was a report this week from Bloomberg that Ireland, Belgium, and Luxembourg have been buying large amounts of U.S. Treasuries. Japan have been big Treasury buyers. But how long can that continue with the financial states of the EU and Japan. The Fed can take up the slack but that would probably devalue the dollar as we have recently begun to see evidence of before the past two week relief rally in the dollar. We might be near the point where the Fed is running out of bullets to maintain low interest rates. They may be trying to appear they are out in front of and still in control when interest rates do start to rise in the future due to large creditors dumping Treasuries in mass. So I tend to think this announcement by the Fed is more than continuing rhetoric to make the public think the economy is recovering and can withstand an increase in rates.
The slight December increase in rates shows that the economy cannot hold up under an increasing rate scenario. I would keep an eye on long term interest rates and not be surprised if they started to rise significantly over the next several months. It will not take that much of a rise in rates to blow this sucker up with not only the egregiously high levels of debt across the board but the unseen icebergs of derivatives residing within the major U.S. money center banks. The dollar will probably go down in tandem with Treasuries going down or precede the start of the decline in Treasuries with them eventually moving in tandem.
U.S. crude oil continued higher and finished the week at $48.48. U.S. natural gas is trading in a four week range and finished the week slightly lower at $2.046. The strength of crude oil leads me to believe that the dollar will continue to fall spurring the further rise in oil and other commodities. Oil inventories are still very high as reported by the Wall Street Journal and Zerohedge and will take some months to work off the excess. Production going forward will be greatly reduced due to large decreases in capital expenditures and the continuing rise in bankruptcies of former shale producers.
A wildcard that is starting to become a constantly reappearing story is the continued and increasing financial instability of the Saudi Arabian regime. Another story appeared this week in the WSJ with the American credit rating agencies downgrading Saudi Arabia’s credit rating. Every week there is a new story relating to the dwindling financial resources of the Saudi regime. If Saudi Arabian finances or their ruling monarchy suffers a serious downfall, the uncertainty of the event would probably send the oil price much higher.
Precious metals look like they may be finally rolling over. Gold has been trading in a 14 week range and finished the week strongly down as did silver. We will have to wait for further evidence to confirm the downward breakout of gold from its the trading range.
Junk bonds appear weak and may retest recent highs before rolling over. The continued and increasing bankruptcies in the shale oil sector should start having an effect on junk bond trading levels. The recent rise in junk bonds has been primarily due to the rise in the oil price but many of the marginal shale companies have gone and will continue to go bankrupt. The junk bond rise has also been fueled by investors looking for pockets of yield in this extremely low interest rate environment. But this is analogous to picking up nickels and pennies in front of an oncoming steamroller. Marginal companies in all sectors will continue suffer as the economy continues to decline. Retail is another sector that has several bankruptcies and store closings.
The economy is continuing to narrow as fewer and fewer companies are able to generate a profit in this declining domestic and global economic environment. The WSJ had an article this week that the top 25 cash holders, about 1% of the companies, control 51% of the total cash, an increase from 38% five years ago. The 1% had their cash grow by 15% in 2015 and have a cash to debt ratio of 153%. The remaining 99% had their debt rise by 730 bln while their cash declined by 40 bln. Their cash to debt ratio is 15%, the lowest in ten years. When interest rates rise, the problems will accelerate and greatly compound the problem of the declining economy. The S&P 500 companies had declining earnings for the fourth straight quarter. There are no real economic indications that the economy is getting better despite what our beloved government keeps telling us. The U.S. stock market is not indicating the health of the economy. It is only an artificially elevated artifice intended to make the public think that things are okay and the government has everything well in hand. Even the insider Wall Street banks that create money out of thin air cannot make much money in this dismal economy as evidenced by their latest earnings reports. There is not an economic recovery coming this way in the foreseeable future as the dollar economy is really only a dollar printing machine that is on the verge of breaking down with no way to repair it under the current system.